Carl
Level 15

Investors & landlords

For starters, the property is not available for rent, until it's actually move in ready. If you incurred expenses in the process of making it move in ready, then it wasn't move in ready and "in service" until those repairs were completed.

Repair expenses, as well as maintenance expenses, are not deductible when preparing the property for rent for that very first time. They never have been deductible either. So expenses incurred prior to the property being "in service" (meaning move-in ready) are just flat out not deductible and never have been.

So if you incurred $2000 of expenses in the process of preparing the property for rent for that very first time, they're not deductible.

Now if the property was in fact, move-in ready on say for example, Dec 27th, then that's your in-service date. For depreciation purposes only the mid-month convention is used and depreciation will be figured from Dec 15th, through the end of the year, regardless of what day in December the property was actually placed in service.  The only way I see for you to have anything close to $1000 of depreciation for the last 15 days of 2020 is if your cost basis in the structure is more than around $650,000. Based on my extremely limited knowledge of the real estate market, I only see that possibility if the property is located in CA or NY. Since your property is in CA, that's a given.

I also question $2000 or more in "repair" expenses. Sounds more like property improvements to me. But then, I don't live in and don't own property in such a high cost of living state either. So $2K for repairs may be perfectly normal and acceptable for the location of your property.